Sunday, November 18, 2012

One way to call it would be as a "policy victory" for Krugman, a "target victory" for Sumner, and a "theory victory" for both New Keynesians and monetarists (less so for Old Keynesians but they're either dead or harmless blackboard stick figures at this point).

For all of those groups to be victorious, NGDP targeting would have to actually work. Right?

I would recommend that liberal economists avoid exultations and confident predictions, but there don't seem to be many consequences for loud and total failure in that industry. So, carry on, you're bulletproof!

Public relations victory for Krugman and Sumner, for slightly different reasons, but like dogparty points out, a theoretical vindication may or may not be forthcoming for either/both.

On a slightly different subject, do you believe it makes any sense to think that maybe the Great Recession may have been avoided with a higher inflation target or higher NGDP growth in the years leading up to it? Maybe the or could be replaced by an and in that question...

It's kind of an odd point: I just mean those Keynesians that don't care about expectations. As we all know Keynes himself cared a lot about expectations! So what we're really talking about is the straw man Old Keynesian that only thinks in terms of statics.